"The government has no source of revenue, except the taxes paid by producers. To free itself - for a while - from the limits set by reality, the government starts a credit scam on a scale that the private manipulator could not even dream. He borrows money from you today, which must be repaid with the money he will borrow from you tomorrow, which must be repaid with the money he will borrow from you the day after tomorrow, and so on it is known as "deficit financing." -Ayn RandPART ONE In 1936, Republican Representative Harold Knuston of Minnesota proposed what would be the first constitutional amendment to balance the federal budget. The Knutson Resolution would establish a per capita limit on all federal debt. The proposal stalled and was struck down by the Judiciary Committee. Over the ensuing decades, legislators and economists have been irresistibly drawn to the lure of a federal balanced budget amendment (BBA) to the U.S. Constitution. In September 1995, two economists (Charles Schultze and Nobel Prize winner James Buchanan) published separate and conflicting articles on the recurring issue of BBA policy in the National Tax Journal. The most convincing argument regarding the BBA would appear to have been made by Charles Schultze. Schultze believes that “it is desirable to balance the budget over the medium-term future and maintain on average (at least) the long-term balance thereafter, and that the amendment should be judged by its usefulness as a means to achieve a desirable end . Judged this way, however, the proposal is seriously flawed in several ways. Schultze first highlights a major concern with implementing a balanced budget amendment in an economy with a sub… middle of paper… any other existing agency or individual. This debt cannot be sold or traded at auction or on the secondary market. The concern with borrowing from non-marketable sources is the ability to repay the trust fund when the debt becomes due. If a large amount of debt owed to the trust were to be redeemed, this could potentially require an increase in taxes or a cut in expenses to repay the debt. While non-marketable debt does not create the repayment difficulties or level of concern of marketable debt, this type of debt still remains an outstanding obligation to the Treasury. Works Cited Schultze, C. (1995) “The Balanced Budget Amendment: Needed? Effective? Efficient? National Tax Journal, vol 48Buchanan,J. (1995) “Clarifying Confusion about the Balanced Budget Amendment” National Tax Journal, Vol 48Rosen H, Gayer T(2010) “Public Finance, 9th